On July 3rd, the Hong Kong stock market saw a net inflow of HK$4.538 billion from northbound capital via the Stock Connect program.

The Shanghai-Hong Kong Stock Connect channel recorded a net purchase of HK$4.468 billion, while the Shenzhen-Hong Kong Stock Connect channel saw a net purchase of HK$70 million.

The stocks that received the most significant net buying from northbound funds were KB LAMINATES (01888), XIAOMI-W (01810), and TENCENT (00700).

Conversely, the stocks that faced the heaviest net selling were HUA HONG GRACE (01347), SMIC (00981), and BABA-W (09988).

Key Purchases and Sector Analysis

KB LAMINATES (01888) and its parent company KINGBOARD HLDG (00148) received net inflows of HK$903 million and HK$94.6 million, respectively.

In the first half of the year, the price of electronic fabric underwent several rounds of increases, with monthly adjustments becoming the industry norm.

As July began, leading electronic fabric manufacturers announced further price hikes, with industry analysts widely expecting this upward pricing trend to continue through the end of the year.

Recently, Kingboard Group's Shaoguan Shixing Industrial Park successfully ignited and began production at its new 70,000-ton annual capacity electronic-grade glass fiber yarn project, completing it three months ahead of schedule.

XIAOMI-W (01810) attracted a net purchase of HK$863 million.

The company reported electric vehicle deliveries exceeding 30,000 units in June.

Analysts at Citigroup suggested that, driven by expectations for 2026 and the upcoming launch of the YU9 model, the stock price could see a rebound in August.

Furthermore, if global Chinese memory chip manufacturers announce more capital expenditure, potentially signaling a peak in memory prices, it is expected to positively impact Xiaomi's stock price over the next 12 months.

TENCENT (00700) saw a net inflow of HK$298 million.

Analysts at Guosheng Securities noted that for AI agents, ecosystem building is a core competitive barrier.

Integrating agents into WeChat could fully unlock the value of its user and application resources, establishing a highly efficient and diverse agent ecosystem.

This move could propel WeChat to become a new "super app" in the AI era, potentially allowing Tencent to gain a competitive edge in the AI race.

Additionally, WeChat is actively promoting collaborations on the device side, such as with smartphones, which could position it as a new operating system for the AI era.

Key Sales and Market Sentiment

YOFC (06869) faced net selling of HK$290 million.

Public information indicates that several companies, including Hengtong Optic-Electric, Far East Smarter Energy, Tongding Interconnection, Hoshine Silicon, and Han's Laser, have initiated plans to expand their optical fiber preform production capacity this year.

Analysts at Nomura stated that if new entrants successfully develop high-end products and smoothly execute their capacity expansion plans, market competition will intensify.

This could put pressure on the profit margins of existing players like Yangtze Optical Fibre.

BABA-W (09988) was sold off to the tune of HK$291 million.

According to a report, internal sources at Alibaba indicated that following a security risk exposure where Claude Code was found to potentially contain a backdoor, the company has placed it on a high-risk software list after a comprehensive evaluation.

Starting July 10th, Alibaba will completely prohibit its employees from using Claude Code in the office environment, recommending Qoder as an alternative.

The ban extends beyond Claude Code to cover all products under Anthropic.

SMIC (00981) and HUA HONG GRACE (01347) experienced significant net outflows of HK$803 million and HK$996 million, respectively.

Market sentiment turned negative following news that Meta plans to lease out its idle AI computing power, leading to perceptions that computing power may be becoming oversupplied and that major tech firms' capital expenditures could decline.

Additionally, reports that Anthropic is in discussions with Samsung Electronics to co-develop proprietary AI chips, potentially using Samsung's 2-nanometer process for manufacturing, reinforced market views that AI companies are entering a phase focused on cost optimization.